Argued December 8, 1896
Decided December 22, 1896
Tracy C. Becker for appellant.
Adelbert Moot for respondent.
It is important at the outset to ascertain the real nature and true character of this action. It is alleged in the complaint that on or about the first day of November, 1887, the plaintiff sold and conveyed his farm to the defendant for the consideration of $20,600, and it appears that the consideration was paid by the defendant in property or obligations. He assumed two mortgages then upon the farm. He gave his notes for a part of the price, and transferred fifty shares of stock in a manufacturing corporation to the plaintiff at par in lieu of $5,000 of the purchase money, and the balance was paid by a mortgage which the defendant, as vendee, gave to the plaintiff on the farm. All these terms and conditions were settled by a preliminary contract between the parties. It is then stated in substance that the plaintiff was induced by fraud to accept the fifty shares of stock in lieu of $5,000 of the purchase price; that the fraud consisted in false and fraudulent representations on the part of the plaintiff as to the value of the stock, the income derived from it, and the pecuniary condition of the corporation. The defendant went into possession of the farm under the conveyance from plaintiff, and it is alleged that the plaintiff did not ascertain the facts or become aware of the fraud that had been practiced upon him until three or four years afterwards, when this action was commenced; that before bringing the suit the plaintiff offered to repay to the defendant all that he had paid, and retransfer the stock upon condition that the defendant would reconvey to him the farm, but the offer was rejected; that $5,000 of the purchase money of the farm has never been paid, but still remains a lien upon the land. The prayer of the complaint is that the plaintiff have judgment that the sum of $5,000 and the interest thereon be adjudged a lien upon the farm and that a sale thereof be decreed in accordance with the practice in foreclosure cases, for the payment of said sum with the expenses of the sale and costs of the action. The material allegations of the complaint, except the offer to restore upon condition of a reconveyance, were put in issue by the answer. The court found the facts in favor of the plaintiff, including the charge of fraud, and found as a conclusion of law that the plaintiff was entitled to judgment for the relief prayed for, with costs, and that the stock should be transferred by the plaintiff to the defendant and declared to be his property.
The judgment contained a direction for the sale of the farm for the payment to the plaintiff of the sum of $6,637.50, being the whole sum of $5,000 and the interest thereon from the date of the conveyance, and also for the satisfaction of the costs of the action, but it contains no provision for a retransfer of the stock by the plaintiff to the defendant.
When fraud has been practiced in the sale and conveyance of real estate by the vendee upon the vendor, as found in this case, the vendor has two remedies. He may proceed in equity to rescind the contract by restoring or tendering to the vendee what he has paid, and in case the fraud and other facts are established, he will be entitled to a decree that the defendant reconvey the land, or the defrauded party may proceed in affirmance of the sale or contract and recover his damages at law for the deceit. The remedy in equity proceeds in disaffirmance, that at law in affirmance of the contract. The party claiming to have suffered from the fraud may elect which form of action or remedy he will pursue, but he cannot have both. ( Bradley v. Bosley, 1 Barb. Ch. 125; Mills v. Bliss, 55 N.Y. 139; Vail v. Reynolds, 118 N.Y. 297; Whitney v. Allaire, 4 Denio, 558; Krumm v. Beach, 96 N.Y. 398; Gould v. Cayuga Co. Nat. Bk., 86 N.Y. 75; S.C., 99 N.Y. 333.)
Nor can he blend the two remedies together and affirm in part and rescind in part. If he elects to rescind he must do so in toto. It was not open to the plaintiff in this case to retain what he had received for the farm except the stock, and insist upon rescinding as to that. Whatever exceptions to this rule may exist they are based upon circumstances and conditions that are not present in this case. ( Nichols v. Pinner, 18 N.Y. 312; Wheaton v. Baker, 14 Barb. 594; Masson v. Bovet, 1 Denio, 74; Bowens v. Mandeville, 95 N.Y. 237; Jewett v. Petit, 4 Mich. 508.)
It is now pertinent to inquire which of these remedies the plaintiff has sought in this case. He demands judgment for the $5,000 and interest thereon from the time of the conveyance of the farm upon the theory that it has never been paid. It is true that he avers that before the action was commenced he offered to restore to the defendant what he had received on condition that the farm should be conveyed back to him, but this has no bearing on the question now under consideration, which is, whether the plaintiff sought to recover damages in affirmance of the contract, or to rescind.
Such an offer may be made in any case before suit, but the true character of the action must be determined by the facts stated in the complaint and the relief demanded. The plaintiff did not ask for any judgment rescinding the contract, or restoring to him the farm. He did not state in his complaint that he was able or willing to restore to the defendant what he had received. He asked that $5,000 of the purchase money, which he alleged had never been paid, be declared a lien upon the land and that this lien be enforced by foreclosure and sale.
Hence, the action was upon the contract and in affirmance of it. The facts pleaded and the relief demanded fix the character of the action as one at law for damages. The plaintiff simply sought to obtain indemnity for the injury caused by the defendant through the fraud practiced, and not to restore the parties to their original position, which is the principle upon which an action in equity to rescind always proceeds. The action would probably be triable by jury but for the incidental relief demanded, that the damages be declared a lien upon the land and that this lien be foreclosed. We do not assert now that this circumstance could be sufficient to deprive the parties, or any of them, of the right to have the question of fraud tried as an issue in an action at law, but simply that the right to a lien for the damages and the enforcement of that lien was the only feature of the case that could draw the action into equity.
It was a material question in the case to determine whether the vendor's lien existed or had been waived under the circumstances of the case, and we are of the opinion that this question was properly disposed of in the courts below. But, assuming that the action was to recover damages, we think the conclusion of the learned trial judge is not sustained by his findings of fact. His legal conclusion was that the plaintiff was entitled to the relief prayed for, that is, for the recovery of the $5,000 and interest thereon from the date of the sale and conveyance. Since the plaintiff elected to proceed upon an affirmance of the contract, he could not recover this sum unless it appeared that the stock was worthless, and no such fact is alleged, proved or found. While most of the questions discussed by the learned counsel for the defendant in the argument and on his brief were not raised at the trial by any motion, request or exception, there is an exception to the conclusion of law which raises the question whether it is sustained by the facts found. The plaintiff was entitled to recover as damages only the difference between the actual value of the stock on November 1, 1887, and its par value, which was what the plaintiff allowed for it upon the purchase price of the farm upon the belief that the defendant's representations as to its condition and value were true. In other words, the plaintiff was entitled to indemnity for his loss and nothing more. There is no finding that the stock was worthless at the time of the transfer of the farm nor as to its value then or at any other time, and without such a finding there was no basis upon which to determine plaintiff's loss or the injury which he sustained from the fraud. It does not appear that the corporation has failed, and from a statement filed in January, 1892, the assets appear to have been $387,000 and the debts $142,000. The whole capital stock was $250,000, and this statement, while showing that it was impaired, is far from showing that it was of no value. So the statement to November, 1887, while showing an impairment, leaves a large margin of property to represent the stock. This court may look into the evidence in order to see whether a finding of fact essential to the support of the judgment should not have been made by the trial court upon the evidence before it. We have examined the evidence in this record for that purpose, and we are of the opinion that it would not justify, much less require, a finding that the stock was worthless or even that it was not worth at least half its par value.
This court cannot supply a finding to support a judgment unless the evidence is conclusive, or at all events so free from conflict that the trial court was bound to make it had such a request been made. It cannot be contended that the evidence in the record bearing on the value of the stock is of such a character. On the contrary, it calls for a finding that it possessed some, and perhaps considerable, value. This difficulty is not obviated by the direction in the decision of the court, that the stock be transferred to the defendant and treated as his property, a measure of relief not demanded in the complaint or carried out in the judgment. Moreover, since the plaintiff elected to proceed in affirmance of the contract to recover damages, he could not compel the defendant to receive back any part of the property which constituted the consideration for the conveyance of the farm. That would be giving to the plaintiff the right to affirm the contract in part and rescind it in part in an action at law, a proposition that has no support in reason or authority.
The judgment must be reversed and a new trial granted, costs to abide the event.
All concur, except HAIGHT, J., not sitting.